Investors interested in Medical - Products stocks are likely familiar with VAREX IMAGING (VREX) and SurModics (SRDX). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
VAREX IMAGING and SurModics are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
VREX currently has a forward P/E ratio of 45.04, while SRDX has a forward P/E of 210. We also note that VREX has a PEG ratio of 9.01. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SRDX currently has a PEG ratio of 21.
Another notable valuation metric for VREX is its P/B ratio of 1.28. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, SRDX has a P/B of 4.57.
These metrics, and several others, help VREX earn a Value grade of A, while SRDX has been given a Value grade of C.
Both VREX and SRDX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that VREX is the superior value option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.